Viatical Fraud Brochure pub

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					                                                          Consumer Division

                                                Viatical Fraud

    Created by the New Hampshire Insurance
       Department (NHID) for informational
      purposes. The NHID does not warrant
    the completeness, timeliness or accuracy
    of the information contained herein. 2006

   State of New Hampshire
    Insurance Department

   21 South Fruit Street, Suite 14
       Concord, NH 03301
                                                State of New Hampshire
Phone: 603-271-2261 or 800-852-3416             Insurance Department
         Fax: 603-271-1406
                                         The applicants are recruited by agents/       Once a viatical settlement company
                                         brokers, viatical brokers and viatical        obtains the policy, it is sold to an
          Viatical Fraud
                                         settlement companies, through aids or         investor during the contestability
                                         terminally ill resource centers, support      period and generally within the first
                                         and activist groups. After tapping these      two months of issuance.
                                         sources, the recruitment continues by
                     Viatical Settle-    word of mouth.                                The settlement companies repre-
                     ments are                                                         sent to the investor that premiums
                     agreements in       Applicants are then paid a fee to submit      will be paid by the company during
                     which life insur-   fraudulent life applications to compa-        the contestability period. Investors
                     ance policies       nies. Such fees range from 1% to 2% of        are not part of the conspiracy and
                     owned by termi-     the face value of the policy.                 are unaware of the fact that the
                     nally ill people                                                  policies are fraudulent. The major-
                     are bought by       The applicant may be promised they will       ity of these investors are drawn
                     viatical compa-     receive a policy in addition to a fee, but    from the elderly population. Most
                     nies and re-sold    in most cases these policies are re-          receive a representation that in the
                     to investors.       tained by the viatical company.               event of cancellation of the policy,
Aside from the sellers, (also called                                                   the company will replace it with an-
viators), and the investors, there       Applicants are sometimes used as re-          other at no extra charge.
are generally two parties who deal       cruiters and will be paid a referral fee of
in the settlements: 1) providers,        1% (of the face value of the policy), for     If there appears to be anything that
who buy the policies and sell them       submitting a lead to the broker or the        would arouse your suspicion that
to investors; and 2) brokers, who        company that results in a sale.               such a scheme has been perpe-
work with the viators and providers                                                    trated, please let the New Hamp-
to work out the details of the agree-    Once the policy is issued, ownership is       shire Department of Insurance
ment.                                    transferred to a trust in the name of a       Fraud Unit know so that appropri-
                                         policyholder. Generally at the time the       ate steps can be taken to determine
Viatical insurance fraud is perpe-       trust is formed, the policyholder will re-    whether viatical fraud has indeed
trated by a scheme known as 'clean       sign as trustee and appoint a represen-       been committed. Our telephone
sheeting'. This is accomplished          tative of the viatical brokerage or Settle-   number is 1-800-852-3416.
when viators conspire amongst            ment Company, as the trustee.
each other to defraud insurance
companies. Generally used would
be an applicant who is between the
age of 15 and 50 having a 'clean                                                                      State of New Hampshire
sheet', meaning they answered                                                                          Insurance Department
"no" to all questions regarding
health and no physical exam was
given. The scheme occurs when
                                                                                                 21 South Fruit Street, Suite 14
an applicant lied about the exis-                                                                    Concord, NH 03301
tence of any life threatening dis-                                                            Phone: 603-271-2261 or 800-852-3416
ease such as cancer or aids.                                                                           Fax: 603-271-1406